Website-Tracking Lawsuits Increasingly Target Small Businesses

Small businesses are increasingly at risk for litigation related to website tracking practices.

That’s according to a recent report from cyber risk analytics company KYND, which found a steep rise in privacy lawsuits tied to web tracking in the U.S. Small and medium-sized businesses (SMBs) are especially at risk, the report found.

“Privacy risk is no longer just about data breaches,” Andy Thomas, CEO of KYND, said in a press release.

“What may seem like a minor compliance issue is becoming a repeatable and scalable source of litigation, particularly across the SMB market. We’re seeing a shift toward claims driven by everyday website behavior.”

This creates a new challenge for insurers, Thomas added, saying that the risks are “scalable, often hidden, and can accumulate across portfolios” in ways that are tough to identify without the proper visibility.

KYND says its study found that suits involving website tracking and digital wiretapping — or the recording of electronic communications without a user’s permission — have surged from just a few hundred cases per year to more than 2,000.

This is happening as legal action increasingly centers around “routine” online behavior instead of cyberattacks or data breaches.

The report also notes that claims focus on how websites collect and share user data that is “often widespread, easy to identify and can be challenged under laws that do not require proof of financial harm.”

This includes activity like pixel-based tracking tools used to gauge website performance and user engagement.

The company said it studied nearly 10,000 North American organizations and found that 17.7% had tracking technologies operating without any apparent user consent, climbing to 20.2% among SMBs with revenues of less than $1 billion.

In addition, the research found that SMBs are more likely to be impacted due to a range of factors, such as a dependence on default website tools, limited technical resources and the increasing use of legal frameworks that allow suits “to be brought at scale.”

PYMNTS wrote Monday (April 6) about another pain point facing SMBs: outdated payment systems against a background of rapid technology advancements.

“Modernizing and digitizing their operations is no longer a ‘nice to have,’ but a ‘must have,’” Ginger Siegel, North America small and medium business lead at Mastercard, told PYMNTS as part of a roundtable discussion.

There is a tension at the center of this shift, the report added, with SMBs simultaneously embracing digital payments as a necessity while wrestling with the operational, cultural and economic frictions connected with setting aside legacy systems.

“The result is a payments landscape that is less about transactions and more about control,” the report added.